Wine Cellar Director Roland Peens shares his predictions for 2016. (First published on Moneyweb.co.za.)
The South African wine industry is currently enjoying one of its most exciting phases in history. Overall wine quality has increased dramatically over the last 5 years and the consumer is now spoilt for choice, with a wealth of new producers, varieties and styles. Though winery input costs have risen, the battered Rand has pushed many struggling wineries into a profitable position. South African wine now offers tremendous value in the export markets and additional profits have allowed for more investment and even greater quality to come.
Here are my predictions for 2016.
1. Fine SA wine will get more expensive: Expect double-digit increases and decreased supply
While the weak Rand has positively affected producers, the knock-on effect will be less kind to the consumer. The demand for fine South African wine abroad is at an all-time high and the pull from export markets will be difficult to ignore. Developed markets, which are inherently larger and more sophisticated, can easily soak up our fine wine production at higher Rand prices. The smaller, more fickle and undeveloped SA market will likely be left with less allocation. This leaves producers with little choice but to push up local prices in order to reach better parity with export markets.
Sadie Family’s Columella is arguably South Africa’s best red wine and sells for more than double in the USA than it does in SA. This is an unsustainable position with ever-increasing globalisation.
A breakdown of our trade agreements with the US and EU will complicate the issue, likely decreasing exports and increasing foreign prices further.
2. Increased quality and higher prices will segment the market: The gap between luxury wines versus alcoholic beverage will widen
South Africa’s most expensive current releases are approximately 100 times more expensive than its least expensive (R2,500 verses R25). The figure in France is closer to 10,000, with a current release Domaine de la Romanée-Conti trading at around €13,000 per bottle on the open market. This leaves a large gap for South Africa at the luxury wine level.
Luxury wines are largely unaffected by the weak economy and require a completely different marketing and business strategy compared to supermarket wines. Supermarket wine prices will likely stay more constant as producers find more efficient ways of production and consumers are squeezed by high inflation.
3. 2015: Possibly our greatest vintage comes to market
El Niño and climate change are causing large vintage variation in the Cape and across the globe, already resulting in 2 of the earliest harvests (2015 and likely 2016) on record. The ‘every year is a good year’ notion is no longer valid and fine wine consumers are better appreciating and understanding vintage variation. Both 2009 and 2012 were excellent recent vintages, but many producers believe 2015 could be superior. 2015 enjoyed favourably dry conditions and grapes were harvested with remarkable health and excellent acidity. Early tank and barrel samples suggest a richly textured, pure and lively vintage with lower alcohols. As the 2015s reach the market, will it prove to be our finest vintage yet?
4. Expect a new wave of lighter reds, especially from Cinsaut
The global trend of lighter reds is hitting South Africa and thankfully the 15%+ alcohol, massively extracted reds, matured in 100% new oak, have lost favour. The savvy consumer is seeking wine with more character, freshness and less alcohol. Lighter reds are also more versatile in our warm climate and more food friendly.
Many of these early-picked, crunchy reds are made from the almost forgotten Cinsaut grape, which can offer fine aromatics, lovely depth and wonderful drinkability. Winemakers are also using Gamay, Grenache, Syrah, Pinotage and Pinot Noir to produce lighter-styled, more natural and unpretentious wines. Some delicious 2015 reds have already hit the market and have received much popularity, including Radford Dale ‘Thirst’; Testalonga El Bandito ‘Made from Grapes’; and Alheit’s ‘Flotsam and Jetsam’.
Producers not willing to adapt to, or at least acknowledge, these changes in the market could slowly lose market share.
5. The rise of vintage wines and an investment market
As South African wines receive more attention and higher prices, there is increased interest in the great wines of yesteryear. Most of the wines from the ‘80s, ‘90s and early 2000s have not aged with grace, but rare wines from the ‘60s and ‘70s are receiving huge praise. GS (George Spies) Cabernet 1966 received the first perfect score from an international critic in 2015 when Jancis Robinson awarded it 20/20. GS is now achieving record prices for SA wine. Similarly, well-stored bottles of vintage Lanzerac, Zonnebloem and Nederburg will become more sought-after and expensive.
Vintage wines from the ‘First Growths’, who became famous in the ‘80s and ‘90s, are also appreciating. The prices of vintage Kanonkop, Klein Constantia and Meerlust are steadily climbing and gaining increased foreign interest.
Today’s leading wineries such as Sadie Family, Mullineux, Boekenhoutskloof and Alheit also have massive potential for investment gains. In Rand terms, these wines are just too cheap when compared to their international counterparts.
6. New varieties will start to find favour
Our industry was modelled on traditional French and German grape varieties that may not be best suited to our soil and climate. More adventurous winemakers with increased international exposure are exploring a host of interesting varieties that offer different styling and flavours. Expect Clairette Blanche, Marsanne, Roussanne and Albariño to appear on shelves and online. Perhaps even a revival of old-vine Colombard, similar to what has happened with the Chenin Blanc revolution. On the reds, expect more exciting Carignan, Mourvedre, Grenache and Tempranillo. Long-ageing, structured Cinsaut will also become more important.
The big 4 varieties of Syrah, Cabernet Sauvignon, Chenin Blanc and Chardonnay will, however, continue to produce the wealth of SA’s finest wine for at least the short or medium term.
7. Water will become more important, especially in dryland areas
The national drought has yet to have a dramatic effect on the wine industry. But with some parts of the Cape having received half their annual rainfall in 2015/2016, vineyards without irrigation will have dramatically decreased yields in 2016. The management of water will be increasingly important, requiring a focus on the vineyard rather than the cellar for quality and quantity. This will further decrease availability and increase price.
8. Ecommerce boom
Wine is a bulky product so why not let somebody else deliver it? As consumers find more confidence in buying online and as logistics and service levels improve, more fine wine will be sold online. Delivery costs generally inhibit supermarket wine sales, but there are a wealth of new wine websites that offer an interesting mix of new wines, as well as free delivery. Find an online merchant that understands your taste and budget; click, drink and enjoy!